Srbijagas Boosts Profit 42%, Urges State to Help Cut Debt

Srbijagas, Serbia’s natural-gas monopoly, posted a 42 percent increase in profit for last year and urged the government to help cut debt owed by other state- run companies.

Net income rose to 1.25 billion dinars ($14.8 million) last year from 881 million dinars in 2010 as earnings from its Novi Sad-based company’s chemical production and glass-making businesses helped offset losses on sales of gas imported from Russia, General Manager Dusan Bajatovic told reporters today.

The company, which sold gas 20 percent to 28 percent below the price it paid to Russia’s OAO Gazprom, will continue posting losses on distributing the fuel as long as the government keeps capping prices at which the Serbian utility is allowed to sell gas to domestic clients, Bajatovic said.

The regulated price keeps gas in Serbia “the cheapest in Europe after Romania,” he said, and has cost the company some 200 million euros ($265 million) since 2008.

Srbijagas has “certain proposals for the government” to help it reduce debt. Liabilities from companies rose 29 percent to 78.4 billion dinars and “at least 20 percent of that will never be paid,” Bajatovic said.

Public Debt

“I’m afraid a considerable part of these liabilities will eventually have to become part of Serbia’s public debt,” he said, adding Srbijagas owes more than 60 billion dinars to banks, of which about two-thirds are “long-term loans.”

Sales rose 3.1 percent to 2.3 billion cubic meters of gas, and the number of clients increased 2.6 percent to more than 76,000 last year.

Srbijagas’s investments in distribution network and gas depots are seen at 224.5 million euros over the next two years, Bajatovic said.

The company is also part of the Gazprom’s South Stream pipeline project, whose 415-kilometers (260 mile) stretch through Serbia may cost 1.65 billion euros to build, Bajatovic said. In October, he estimated the cost at 1.38 billion euros.

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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